The Economic and Ecological Impact of Natural Resource Extraction: The Case of the Camisea Gas Project in Peru

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Sep 2018
This paper presents the first rigorous empirical evidence of the impact of a large hydrocarbon project in both its economic and environmental dimension. Concentrating on Peru’s largest hydrocarbon project, the Camisea Gas Project, which began operating in the dense Amazonian jungle under strict environmental safeguards in 2004, we assess whether natural resource extraction can have beneficial economic effects without causing negative environmental externalities. The analysis relies on the synthetic control method to systematically choose comparison units (departments), which allows for precise quantitative inference in small-sample studies. Our results indicate that in six of the eight years since the Camisea gas fields began operating, local economic effects, as measured by nighttime lights data, are robustly positive. An examination of remotely-sensed vegetation data suggests that the Camisea Gas Project did not have a significant effect on deforestation, suggesting that the implementation of stringent safeguards can help mitigate environmental risks.